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4. The Case for Fair Use

Fair use is sufficiently certain and predictable

4.117 Standards are generally less certain in scope than detailed rules. However, a clear principled standard is more certain than an unclear complex rule. This Report recommends replacing a number of complex prescriptive exceptions, with a clear and more certain standard, namely, fair use. The standard recommended by the ALRC is not novel or untested. Fair use builds on Australia’s fair dealing exceptions, it has been applied in US courts for decades, and it is built on common law copyright principles that date back to the eighteenth century.

4.118 Nevertheless, the most significant concern raised by stakeholders opposed to fair use was that the lack of clear and precise rules would result in uncertainty about what uses are fair.[166] It was argued that the uncertainty would create a need for both rights holders and users to obtain legal advice, thus increasing transaction costs.[167] Where agreement cannot be reached on what is fair, litigation would be required to determine the scope of permitted uses.[168] Some stakeholders were concerned about a ‘chilling’ effect, as those who could not afford legal advice or the risk of litigation would avoid using material in a way that might in fact be fair.

4.119 Certainty is important for both rights holders and users of copyright material. Without the certainty that rights can be exploited, or about the extent to which they can be exploited, rights holders might not invest in innovative business models, and some potential creators might not create. Without certainty, the risk of investment can become too great. Uncertainty can therefore undermine a core purpose of copyright.

4.120 Users of copyright material also need some degree of certainty in the scope of exceptions. Not only will consumers value the certainty of knowing that they can make certain unpaid uses of material without infringing copyright, but businesses that make transformative uses of copyright material also need certainty, so that they have the confidence to invest in new business models and services. Optus would presumably not have invested in the development of its TV Now service, if the scope of the current time shifting exception were clearer.[169] CAG Schools submitted that complex copyright laws were preventing or discouraging Australian schools from using modern teaching methods.[170]

4.121 In the ALRC’s view, fair use is sufficiently certain and predictable, and in any event, no less certain than Australia’s current copyright exceptions. Chapter 5 describes how owners and users of copyright material will be guided by the fairness factors, the list of illustrative purposes, existing Australian case law, other relevant jurisdictions’ case law, and any industry guidelines and codes of practice that are developed.

4.122 The test of fairness is also not novel in Australian law. The existing fair dealing exceptions require the application of a fairness test and the fairness factors that the ALRC is recommending are substantially the same as those currently provided in the fair dealing exceptions for research or study.[171] In addition, substantial guidance can be obtained from overseas case law and academic commentary.

4.123 The evidence that is available, from recent research, suggests that fair use in the US is not uncertain.[172] In 2009, Professor Pamela Samuelson published her ‘qualitative assessment’ of the fair use case law.[173] Samuelson argued that ‘fair use is both more coherent and more predictable than many commentators have perceived once one recognizes that fair use cases tend to fall into common patterns’.[174] She explained that it is generally possible to predict whether a use is likely to be fair use by analysing previously decided cases in the same policy cluster.[175]

4.124 In 2012, Matthew Sag went further than Samuelson and ‘assesse[d] the predictability of fair use in terms of case facts which exist prior to any judicial determination’.[176] He argued that his work

demonstrates that the uncertainty critique is somewhat overblown: an empirical analysis of the case law shows that, while there are many shades of gray in fair use litigation, there are also consistent patterns that can assist individuals, businesses, and lawyers in assessing the merits of particular claims to fair use protection.[177]

4.125 US experience and empirical research suggest that certainty can come from guidelines developed by peak bodies, industry protocols, and internal procedures and documentation.[178] As discussed in Chapter 3, the Australian Communications and Media Authority points to the benefits of industry co-regulation and self-regulation in setting standards and developing understanding of practices.[179]

4.126 A number of stakeholders point to the capacity of business, consumers and government to develop an understanding of acceptable practices. In the words of one stakeholder:

To suggest that legal change leads to insurmountable business difficulties in understanding legal obligations ignores that a new, more open-ended exception leaves entirely in place the established power of large private and institutional actors to continue to negotiate their copyright practices on the terms that they think are appropriate and reasonable.[180]

4.127 The Australian Content Industry Group discussed the benefits of an industry code being developed between the Australian Government and relevant industry participants for a ‘graduated response’ to unauthorised downloading.[181] This has not been concluded, but the process shows how an understanding of a principle of law might develop in specific industries and sectors.

4.128 It is important for individuals, institutions and business to know what uses they can make of copyright material, and it is important for rights holders to know when their rights are exclusive. However, concerns about certainty can be overstated. The ALRC does not agree with claims that ‘the vast majority of uses’ will be controversial.[182] Most everyday uses will not be in question. As Robert Xavier noted ‘practically all economically significant forms of infringement will be just as unlawful under fair use as they are now’.[183] Uncertainty is more likely to arise when a new use emerges, and such a use is more likely to be subject to litigation. The ACCC observed that it is in the newer areas of copyright use where flexibility is most necessary.[184]

4.129 The opponents of fair use have pointed to research indicating that the outcome of fair use cases is unpredictable.[185] The outcome of litigation is never completely predictable—if it were, the parties would not have commenced litigation, or would likely have settled. This is also true of recent litigation over the fair dealing exceptions and specific exceptions.

4.130 The closed-ended nature of the fair dealing exceptions creates uncertainty, because it can be difficult to determine if a particular use falls into one of the specified purposes.[186] A number of stakeholders pointed out that TCN Channel Nine v Network Ten Ltd (‘the Panel case’)[187] focused on the question of whether the use of clips in an entertainment show was for the purpose of reporting news or the purpose of criticism and review.[188] Fair use would avoid this problem, by not confining the exception to a set of prescribed purposes.